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Chapter: Reconstitution of Partnership (Admission of Partner)· Book-Keeping & Accountancy

Nishant and Yogesh were partners sharing profits and losses in the ratio 3 : 1. Their Balance Sheet as on 31st March, 2022 was as follows:Balance Sheet as on 31st March, 2022LiabilitiesAmount (₹)AssetsAmount (₹)Capital Account:Cash in hand37,500Nisha…

Q.2 Nishant and Yogesh were partners sharing profits and losses in the ratio 3 : 1. Their Balance Sheet as on 31st March, 2022 was as follows:

Balance Sheet as on 31st March, 2022

LiabilitiesAmount (₹)AssetsAmount (₹)
Capital Account:Cash in hand37,500
Nishant 75,000Bills Receivable45,000
Yogesh 81,0001,56,000Debtors 75,000
Less: R.D.D. 7,500		67,500
Reserve Fund24,000Furniture30,000
Creditors45,000Stock45,000
2,25,0002,25,000

They admitted Niharika for 1/5th share on 1st April, 2022 on the following terms:

  1. Niharika shall bring ₹ 60,000 as her capital.
  2. Niharika shall pay her share of goodwill in cash. Goodwill will be calculated on the basis of 4 years’ purchase of profits of last 5 years. Profits since last five years are given as under:
    2016-17 — ₹ 30,000
    2017-18 — ₹ 22,500
    2018-19 — ₹ 37,500
    2019-20 — ₹ 15,000
    2020-21 — ₹ 22,500
  3. Assets were revalued as under: Furniture ₹ 22,500, Bills Receivable ₹ 60,000, Stock ₹ 30,000, R.D.D. to be increased upto ₹ 15,000.
  4. Bills payable of ₹ 7,500 have been omitted from books.

Prepare: (a) Revaluation Account (b) Partners’ Capital Account (c) Balance Sheet of the new firm.

OR

Riddhi, Siddhi and Kirti are partners in a firm. They share profits and losses in the ratio 3 : 1 : 1 respectively. Their Balance Sheet as on 31st March, 2020 is given below:

Balance Sheet as on 31st March, 2020

LiabilitiesAmount (₹)AssetsAmount (₹)
Creditors45,000Motor Truck1,10,000
Bills Payable30,000Plant and Machinery40,000
General Reserve55,000Building80,000
Capital Accounts:Livestock55,000
Riddhi1,30,000Debtors65,000
Siddhi1,05,000Freehold property52,500
Kirti55,000Bank17,500
4,20,0004,20,000

On 1st April, 2020 Kirti retired on the following terms:

  1. Goodwill was valued at ₹ 50,000 and to be retained in the business.
  2. Assets were revalued as under: Debtors – ₹ 57,000, Live Stock – ₹ 65,000, Building – ₹ 82,000, Plant and Machinery – ₹ 41,000, Motor Truck – ₹ 1,00,000.
  3. Riddhi and Siddhi contributed additional capital through RTGS of ₹ 55,000 and ₹ 30,000 respectively.
  4. Balance of Kirti’s capital account to be transferred to her loan account.

Pass Journal Entries in the books of the new firm.

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Answer: Revaluation loss ₹ 22,500 (Nishant ₹ 16,875, Yogesh ₹ 5,625); closing capitals Nishant ₹ 91,425, Yogesh ₹ 86,475, Niharika ₹ 60,000; new Balance Sheet total ₹ 2,90,400. (OR: Kirti’s loan ₹ 75,000.)

Working notes

  • Average profit = (30,000 + 22,500 + 37,500 + 15,000 + 22,500) ÷ 5 = 1,27,500 ÷ 5 = ₹ 25,500.
  • Goodwill of the firm = 25,500 × 4 = ₹ 1,02,000. Niharika’s share = 1,02,000 × 1/5 = ₹ 20,400, brought in cash.
  • No new ratio is given, so the old partners sacrifice in their old ratio 3 : 1. Goodwill premium: Nishant 20,400 × 3/4 = ₹ 15,300; Yogesh 20,400 × 1/4 = ₹ 5,100.
  • Reserve Fund ₹ 24,000 in 3 : 1 = Nishant ₹ 18,000, Yogesh ₹ 6,000.
  • R.D.D. increased from ₹ 7,500 to ₹ 15,000 = ₹ 7,500 loss. Omitted Bills Payable ₹ 7,500 is a loss and a new liability.
  • Cash = 37,500 + 60,000 + 20,400 = ₹ 1,17,900.

(a) Revaluation Account

Dr. ParticularsAmount (₹)Cr. ParticularsAmount (₹)
To Furniture A/c7,500By Bills Receivable A/c15,000
To Stock A/c15,000By Loss on revaluation transferred to:
Nishant’s Capital A/c 16,875
Yogesh’s Capital A/c 5,625		22,500
To R.D.D. A/c7,500
To Bills Payable A/c7,500
37,50037,500

(b) Partners’ Capital Accounts

Dr. ParticularsNishant (₹)Yogesh (₹)Niharika (₹)Cr. ParticularsNishant (₹)Yogesh (₹)Niharika (₹)
To Revaluation A/c (loss)16,8755,625–By Balance b/d75,00081,000–
To Balance c/d91,42586,47560,000By Reserve Fund A/c18,0006,000–
By Premium for Goodwill A/c15,3005,100–
By Cash A/c (capital)––60,000
1,08,30092,10060,0001,08,30092,10060,000

(c) Balance Sheet of the new firm as on 1st April, 2022

LiabilitiesAmount (₹)AssetsAmount (₹)
Capital Accounts:Cash in hand1,17,900
Nishant 91,425Bills Receivable60,000
Yogesh 86,475Debtors 75,000
Less: R.D.D. 15,000		60,000
Niharika 60,0002,37,900Furniture22,500
Creditors45,000Stock30,000
Bills Payable7,500
2,90,4002,90,400

OR: Journal entries in the books of Riddhi and Siddhi (retirement of Kirti)

Working notes

  • Goodwill ₹ 50,000 is to be retained, so a Goodwill Account is raised and credited to all partners in the old ratio 3 : 1 : 1 = ₹ 30,000, ₹ 10,000, ₹ 10,000.
  • Revaluation: decrease in Debtors ₹ 8,000 and Motor Truck ₹ 10,000 = ₹ 18,000; increase in Livestock ₹ 10,000, Building ₹ 2,000, Plant and Machinery ₹ 1,000 = ₹ 13,000. Net loss ₹ 5,000 = ₹ 3,000, ₹ 1,000, ₹ 1,000.
  • General Reserve ₹ 55,000 in 3 : 1 : 1 = ₹ 33,000, ₹ 11,000, ₹ 11,000.
  • Kirti’s capital = 55,000 + 10,000 + 11,000 – 1,000 = ₹ 75,000, transferred to her Loan Account.
DateParticularsL.F.Debit (₹)Credit (₹)
1-4-2020Goodwill A/c Dr.
To Riddhi’s Capital A/c
To Siddhi’s Capital A/c
To Kirti’s Capital A/c
(Goodwill raised and credited to partners in 3 : 1 : 1)		50,000
30,000
10,000
10,000
Revaluation A/c Dr.
To Debtors A/c
To Motor Truck A/c
(Decrease in value of assets)		18,000
8,000
10,000
Livestock A/c Dr.
Building A/c Dr.
Plant and Machinery A/c Dr.
To Revaluation A/c
(Increase in value of assets)		10,000
2,000
1,000

13,000
Riddhi’s Capital A/c Dr.
Siddhi’s Capital A/c Dr.
Kirti’s Capital A/c Dr.
To Revaluation A/c
(Loss on revaluation shared in 3 : 1 : 1)		3,000
1,000
1,000

5,000
General Reserve A/c Dr.
To Riddhi’s Capital A/c
To Siddhi’s Capital A/c
To Kirti’s Capital A/c
(General Reserve distributed in 3 : 1 : 1)		55,000
33,000
11,000
11,000
Bank A/c Dr.
To Riddhi’s Capital A/c
To Siddhi’s Capital A/c
(Additional capital brought in through RTGS)		85,000
55,000
30,000
Kirti’s Capital A/c Dr.
To Kirti’s Loan A/c
(Balance of retiring partner’s capital transferred to her loan account)		75,000
75,000
Doubtly AI · 29 Oct 2026 AI-generated · not yet verified Report
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